Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

want to make sure this is correct? also need to know if it is inflow or outflow for part C Suppose your company needs to

image text in transcribed

want to make sure this is correct? also need to know if it is inflow or outflow for part C

image text in transcribed
Suppose your company needs to raise $69 million and you want to issue 30-year bonds for this purpose. Assume the required return on your bond issue will be 4.2 percent, and you're evaluating two issue alternatives: A semiannual coupon bond with a coupon rate of 4.2 percent and a zero coupon bond. Your company's tax rate is 25 percent. Both bonds will have a par value of $2,000. a1. How many of the coupon bonds would you need to issue to raise the $69 million? a-2. How many of the zeroes would you need to issue? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b-1. In 30 years, what will your company's repayment be if you issue the coupon bonds? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) b-2. What if you issue the zeroes? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, e.g., 1,234,567.) c. Calculate the aftertax cash flows for the first year for each bond. (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, e.g., 1,234,567.) a Number of coupon bonds 34,500 m Number of zero coupon bonds 120,050.40 m Coupon bonds repayment $ 70,449,000 _ $ I Coupon bonds $ 2,173,500 - Zero coupon bonds $ 732,107

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: James Jiambalvo

6th edition

9781119158226, 111915801X, 1119158222, 978-1119158011

Students also viewed these Finance questions